Unemployment

Unemployment

Types: (AND CAUSES)

·         Seasonal: regular changes in employment/ labour demand- i.e. more retail unemployment after xmas

·         Structural: when a person and job have a mismatch of skills and job opportunitieschanges- linked to labour immobility. Happens when demand for labour is less than supply for it in a particular labour market. i.e. decline of manufacturing, occupational and geographical immobility, robotics replacing jobs, foreign competition, long term regional decline, poverty trap, outsourcing overseas

·         Frictional: transitional unemployment- people moving between jobs

·         Cyclical: (aka demand deficient) due to a lack in AD, often when in a recession

·         Real Wage: (aka classical) when wage rates increase, so there’s an increase in supply for labour (people want more £) and decrease in demand for it (firms can’t afford it). This excess is the unemployment.  Due to increase in minimum wage, trade union action, information deficit.

Problems with it:

·         Economic costs:

o   Lost output and efficiency: The economy is inside the PPF

o   Fall in real incomes: lower living standards

o   Increased budget deficit: lower tax revenue and higher welfare

o   Possible decline in labour supply: unemployed might move abroad

·         Social costs:

o   Increase in relative poverty: no job, rely on…